The Indian government is increasing ethanol production targets and shifting feedstock preference toward grains, threatening the traditional sugarcane-based sugar sector [1, 2].
This shift matters because sugar manufacturers have long relied on sugarcane to supply the nation's ethanol needs. As the state prioritizes cheaper grain alternatives to reduce oil imports, the economic stability of sugar mills faces new risks.
To accelerate the transition, the government abolished the excise duty on petrol blended with 22% to 30% ethanol in March 2024 [2]. While this policy move initially sent sugar stocks higher, the long-term feedstock mix is trending away from sugarcane.
Prashant Biyani, an analyst at Elara Securities, said the current mix of ethanol feedstock is at 70% grains and 30% sugar [1]. This imbalance is reflected in the operational capacity of the industry, with sugarcane plant utilization levels currently sitting between 60% and 65% [1].
Demand for the fuel has surged in recent years. Deepak Ballani, a spokesperson for the Indian Sugar & Bioenergy Manufacturers Association (ISBMA), said ethanol requirement has gone up from 500-600 crore litres in 2022-23 to 1,200 crore litres now [1].
The government's strategy aims to meet renewable fuel targets by diversifying the sources of ethanol. However, the preference for grain feedstocks creates a competitive disadvantage for mills that are heavily invested in sugarcane processing infrastructure [1, 2].
“The mix of ethanol feedstock right now is at 70% grains with 30% sugar.”
India is attempting to decouple its energy security from a single crop. By diversifying feedstock to include grains, the government reduces the risk of fuel shortages caused by sugarcane crop failure, but it simultaneously strips the sugar industry of a guaranteed revenue stream, potentially forcing mills to diversify their own operations or face obsolescence.
